Equity release: Four reasons why it might be right for you
This article is written by Age Partnership. If you're a homeowner aged 55 or older, you might be considering how to tap into the wealth tied up in your property.
Equity release offers a way to access that value without needing to move or sell your home. While it’s not suitable for everyone, there are reasons why it might align with your financial goals.
Andrew Morris, senior equity release advisor at Age Partnership, shares four key benefits that could make equity release a worthwhile option.
Access tax-free cash from your home
“Equity release is a way for customers to unlock funds from their property,” explains Andrew. “The amount available is dependent on your age, the property’s market value, and your financial needs.
“If you are eligible, you may be able to release anywhere from £10,000 up to 58% of your property’s value with current lender offerings. An advisor will help determine the exact amount based on your personal circumstances.”
Use the funds to achieve your goals
Understanding how you plan to use the money is essential. “When I meet with clients, we discuss their goals to ensure they don’t borrow more than necessary or fall short of what they need,” says Andrew.
One key condition of equity release is that any existing mortgage must be repaid first—this can be done using the released funds. After that, the remaining money can be used for a range of purposes, such as:
· Renovating your home.
· Purchasing a new vehicle.
· Taking a dream holiday.
· Helping family members financially.
Continue owning 100 per cent of your home with a lifetime mortgage
“There are two main types of equity release, a lifetime mortgage and a home reversion plan. The most popular option for my clients is a lifetime mortgage.
“The main difference between the two is that a lifetime mortgage is secured against your property, and you maintain 100 per cent home ownership. There is also no requirement to make repayments as the equity released, plus accrued interest, is repaid when you die or move into long-term care.”
“With a home reversion plan you sell all or a part of your home in exchange for a lump sum, but the amount you receive is less than the market value of the portion you sell. You can continue living in it, typically rent free, until you die or move into long-term care. When your home is sold, your estate will receive the proceeds from any portion you still own, and the rest will go to the plan provider.
“With either plan, you can choose whether you would prefer to take the money you release as a lump sum or smaller amounts when you need them. Both options will also reduce the value of your estate and impact funding long-term care.”
Protect a portion of your estate for loved ones
Concerned about leaving an inheritance? Some equity release plans let you ring-fence a portion of your home’s value to pass on to your beneficiaries. “This feature may be helpful for some customers,” says Andrew, “though it will reduce the amount you can borrow.”
Advice is required to proceed with equity release and there may be other options which better suit your circumstances. Your advisor will be able to talk you through all the different features, so you fully understand what your options are, and if there is a plan that’s right for you.
Equity release may involve a lifetime mortgage, secured against your property, or a home reversion plan. It will reduce the value of your estate and impact funding long-term care.
Any money you release, plus accrued interest, is repaid when you die or move into long-term care.
Through Age Partnership, initial advice is provided for free and without obligation. Only if your case completes would an advice fee of £1,995 be payable. Other lender and solicitor fees may apply.
Find out how much you could unlock with Age Partnership here.
Age Partnership is a trading name of Age Partnership Limited, which is authorised and regulated by the Financial Conduct Authority. FCA registered number 425432. Company registered in England and Wales No. 5265969. VAT registration number 162 9355 92. Registered address, 2200 Century Way, Thorpe Park, Leeds, LS15 8ZB.